Kiffmeister’s FinTech Daily Digest (07/01/2020)

The Digitization of Money and Payments
The US Senate Banking Committee held a hearing on how a blockchain-based US dollar could be created and regulated. On June 11 the U.S. House of Representatives held an open hearing of the Task Force On Financial Technology. It focused on the idea of direct accounts provided by the Fed for citizens (FedAccounts) using post offices as the brick and mortar access points. The second focus was on the blockchain-based central bank digital currency (digital dollar) that would be distributed through a two tier system, similar to cash distribution today.

CBDC adoption and usage – some insights from field and laboratory experiments
This Bank of Canada note discusses insights from historical launches of new payment methods and related laboratory experiments on the potential adoption and use of a central bank digital currency in the Canadian context. It finds that a necessary condition to successfully initiate and sustain the adoption and use of a CBDC is to ensure the CBDC has a clear niche in the payment landscape. A possible route is to design a CBDC as “enhanced cash”—to reduce the carrying and handling costs associated with cash and enable electronic transfers, while retaining cash’s distinctive desirable features. Desirable design features of a CBDC could include universal accessibility, transparent and low per-transaction fees, a high degree of privacy and robust offline capabilities. Due to network effects, sustained adoption and use of a CBDC as a person-to-business (P2B) payment method would occur if, and only if, consumers and merchants both benefit from switching from the status quo. Enabling person-to-person (P2P) functionality could help capture the consumer side and promote P2B use.

Wirecard administrator starts to dismantle defunct payments group
Wirecard’s administrator said “numerous” companies have expressed interest in buying parts of the payments group that last week became the first member of Germany’s prestigious Dax index to file for insolvency. Michael Jaffé, one of Germany’s leading specialists for complex insolvencies, will soon ask investment banks to oversee the potential sale of some of Wirecard’s units.

Wirecard Complies with MAS Directions to Keep Customer Funds in Banks in Singapore
The Monetary Authority of Singapore (MAS) said today that Wirecard entities in Singapore have complied with MAS’s directions to hold customers’ funds in segregated accounts with banks in Singapore. MAS is closely monitoring the operations of Wirecard. Wirecard’s primary business activities in Singapore are to process payments for merchants and help companies issue pre-paid cards. Wirecard has informed MAS that it is assessing its ability to continue providing its services in Singapore in light of the filing for insolvency in Germany by its parent company Wirecard AG.

Coronavirus panic fuels a surge in cash demand
Covid-19 has led to banknote hoarding in Australia, Brazil, Canada, the eurozone, Russia and the US, fuelled by concerns about financial system stress, according to analysis by Jonathan Ashworth and Charles Goodhart. The data suggests that cash in circulation has surged in a number of countries affected by the coronavirus. Even after the initial March jumps in some countries, subsequent gains have been quite large. The rise likely reflects the use of cash for one of its other traditional functions – panic-driven hoarding.

European Commission: Caps on interchange fees have proved their worth
The European Commission says regulations to cap the interchange fees charged to merchants by the global card schemes have had the desired effect of reducing costs to merchants and driving cross-border acquiring. The main objectives of the initial 2015 Regulation were the creation of a single market for card payments and the prevention of competition restrictions, including the inability of merchants to negotiate fees below the interchange fees levels. The separation of card schemes from entities processing card transactions was specified by Regulatory Technical Standards, which entered into force on 7 February 2018.

The GSMA Inclusive Tech Lab launches an industry-leading Interoperability Test Platform for financial inclusion
The GSMA Inclusive Tech Lab launched the Interoperability Test Platform, a joint test environment combining the GSMA Mobile Money API, a harmonised industry specification for all common mobile money use cases, and Mojaloop, an open source code, developed to accelerate financial inclusion through digital payments. The platform will provide the industry with an open-source and secure environment for ecosystem participants to test their systems across different use cases in an interoperable mobile money ecosystem.

Australia takes first steps towards Open Banking
Australians can now choose to share their banking data to access more personalised financial products and services following the launch of the Consumer Data Right. All four major banks are capable of sharing their customers’ data, when requested by the customer. Other authorised deposit-taking institutions will join the Consumer Data Right over the coming year. Overseen by the Australian Competition and Consumer Commission, consumer data relating to credit and debit cards, deposit accounts and transaction accounts are now available to be shared. Mortgage and personal loan data will be added from November.

An estimated 1.9 million U.K. residents hold digital assets, according to FCA study
A U.K. Financial Conduct Authority market research note estimated that 3.86% of U.K. residents hold crypto-assets. This amounts to approximately 1.9 million adults with the UK population (over 18) taken to be approximately 50 million.

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